Exhibit
10.4


 


NSP
HOLDINGS L.L.C.

UNIT APPRECIATION RIGHTS PLAN


 


Article 1


 


Purpose of Plan


 


1.1           Purpose.  The purpose of the Unit Appreciation Rights
Plan is to further the long-term growth in earnings and value of NSP Holdings
L.L.C. and its affiliates by offering long-term incentives in addition to
current compensation to key individuals of NSP Holdings L.L.C.


 


Article 2


 


Definitions


 


Whenever the following terms are used in the NSP
Holdings L.L.C. Unit Appreciation Rights Plan, they shall have the meanings
specified below unless the context clearly indicates to the contrary:


 


2.1           Account
shall mean a bookkeeping account established by the Committee for each
Participant to which the Appreciation Rights attributable to the Designated
Units shall be credited.


 


2.2           Appreciation
Right shall mean a right to an amount equal to the difference between the
Grant Value and the Exit Value (or Market Value upon a Realization Event to the
extent specified in this Unit Appreciation Rights Plan) of a Designated Unit.


 


2.3           Appropriate
Form shall mean the form provided or prescribed by the Committee for the
purpose specified by the Plan.


 


2.4           Beneficiary
shall mean such person or persons or legal entity as may be designated by a
Participant to receive benefits hereunder after such Participant’s death, or,
in the absence of such designation, the personal or legal representative of the
Participant.


 


2.5           Board
shall mean the Board of Managers of the Company.


 


2.6           Committee
shall mean the Management Team as determined by the Board of Managers of the
Company.


 


2.7           Company
shall mean NSP Holdings L.L.C.


 


2.8           Company
Value shall mean the value of the Company as a whole, which will be
determined at the end of each fiscal year according to a formula equal to six
times the prior year’s EBITDA minus debt (average term debt during the year
plus average revolver outstanding during the year) plus average cash (over
necessary working capital).


 


2.9           Designated
Unit shall mean a Unit under which an Appreciation Right has been granted.


 

















 


2.10         Disability
or Disabled shall mean the state of being unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 60
months, such Disability to be deemed to exist when so determined by the
Committee, in its sole discretion.


 


2.11         Effective
Date shall mean the date the Plan is effective which is January 1, 1997.


 


2.12         ERISA
shall mean the Employee Retirement Income Security Act of 1974, as amended.


 


2.13         Grant
Value shall be determined at the end of the previous fiscal year as the
Company Value divided by the total number of Units (including but not limited
to Units issued and Units for which options, warrants, appreciation rights or
other equity equivalents have been granted).


 


2.14         Key
Individual shall mean any individual rendering services to the Company who
is designated by the Committee as a Key Individual.


 


2.15         Participant
shall mean any Key Individual who is selected by the Committee for
participation in the Plan.


 


2.16         Plan
shall mean the NSP Holdings L.L.C. Unit Appreciation Rights Plan.


 


2.17         Plan
Year shall mean the 12 consecutive month period ended December 31st,
including periods prior to the date on which the Plan was adopted.


 


2.18         Realization
Event.  A Realization Event shall
mean a sale of the Company or an initial public offering (IPO).


 


2.19         Retirement
Date shall mean the first day of the month coincident with or immediately
following the date on which a Participant attains age 65.


 


2.20         Separation
Date shall be the date on which a Participant’s service with the Company is
terminated (whether on account of retirement, death, Disability, discharge, or
voluntary separation).


 


2.21         Unit
shall mean a Common Unit of NSP Holdings L.L.C.


 


2.22         Valuation
Date shall mean the last day of each Plan Year and such other dates as the
Committee may determine.


 


Article 3


 


Eligibility and
Participation


 


3.1           Eligibility.  Any Key Individual is e1igible to
participate in the Plan.


 


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3.2           Participation.  The Committee, in its sole discretion, shall
select those Key Individuals who are to participate in the Plan.  A Key Individual shall become a Participant
on the date he is notified by the Committee of his selection to participate
under the Plan.  After a Key Individual
becomes a Participant in the Plan, his active participation shall continue
until his Separation Date.


 


Article 4


 


Establishment of Accounts and Determination,


 


Allocation and Crediting of Units


 


4.1           Accounts.  The Committee shall establish and maintain,
or cause to be maintained, a separate Account for each Participant.  The Committee shall also maintain or cause
to be maintained, a record of the Appreciation Rights credited and debited to
each Participant’s Account.


 


4.2           Determination
of Designated Units.  As of the
Effective Date, the number of Appreciation Rights granted and to be granted are
reflected on Appendix A.


 


4.3           Allocation
of Appreciation Rights.  Following
the end of each fiscal year, the Committee shall present recommendations for
new grants of Appreciation Rights and the Board will allocate the Appreciation
Rights authorized by it for such fiscal year among Participants.  All Appreciation Rights shall be allocated
as of the first day of the Plan Year.


 


Article 5


 


Vesting


 


5.1           Regular
Vesting.  Subject to the following
subsections, a Participant’s interest in the Appreciation Rights credited to
his Account shall vest in accordance with the following schedule:


 


	
  Number of Years Since 

  Appreciation Right 

  Was Allocated

  	
   

  	
  Vested

  (Nonforfeitable)

  Percentage

  	
   

  	
  Forfeitable

  Percentage

  	
   

  
	
  1

  	
   

  	
  10

  	
   

  	
  90

  	
   

  
	
  2

  	
   

  	
  30

  	
   

  	
  70

  	
   

  
	
  3

  	
   

  	
  60

  	
   

  	
  40

  	
   

  
	
  4

  	
   

  	
  100

  	
   

  	
  0

  	
   

  



 


 


5.2           Accelerated
Vesting.  A Participant’s interest
in the Appreciation Rights credited to his Account shall be fully vested and
nonforfeitable on the earlier of the following dates:


 


(a)           the date of a
Participant’s death, provided he dies while in the service of the Company; or


 


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(b)           the date of a
Participant’s Disability, provided he becomes Disabled while in the service of
the Company; or


 


(c)           the date of a
Realization Event; or


 


(d)           termination of the
Plan.


 


5.3           Termination
for Cause.  Notwithstanding the
foregoing, all Appreciation Rights (vested or non-vested) shall be forfeited in
the event of a termination for Cause. 
For purposes of this Plan, “Cause” shall be deemed to mean one or more
of the following:  (a) Participant’s
embezzlement or misappropriation of funds, (b) Participant’s conviction of a
felony involving moral turpitude, (c) Participant’s commission of material acts
of dishonesty, fraud, or deceit, (d) Participant’s breach of any material
provisions of any employment or service agreement with the Company to which he
is a party, (e) Participant’s habitual or willful neglect of his duties, (f)
Participant’s breach of fiduciary duty to the Company involving personal
profit, or (g) Participant’s material violation of any other duty to the
Company or its members imposed by law or by the managers.


 


Article 6


 


Distribution of Benefits


 


6.1           Valuation
of Appreciation Rights.


 


(a)           Value
Upon Termination.  Upon a
Participant’s termination of service other than for cause, the Exit Value of
the Appreciation Rights of a Participant will be fixed in value as of the
Participant’s Separation Date.  The Exit
Value will be determined based on a weighted average of the Grant Values for the
preceding 3 years prior to the termination date as follows (the Grant Value for
the years preceding the effective date of the Plan through December 31, 1998
shall be $1.20 per unit and thereafter in accordance with the Plan, but in any
event no less than $5.89 per unit):


 


	
  Number of Years Preceding 

  Termination Date

  	
   

  	
  Weight To
  Be Given

  To Such Year’s Grant

  Value

  	
   

  
	
  1

  	
   

  	
  60

  	
  %

  
	
  2

  	
   

  	
  30

  	
  %

  
	
  3

  	
   

  	
  10

  	
  %

  



 


(b)           Value
Upon Realization Event.


 


(1)           In
the event of an IPO, the value of the Appreciation Rights shall be redeemed in
the form of publicly-traded units or stock.


 


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(2)           In
the event of a sale for cash, notes and/or publicly-traded securities, the
Appreciation Rights shall be redeemed for the same combination of cash, notes
and/or publicly traded securities.


 


(3)           In
the event of a merger in which the Company remains in control, the Appreciation
Rights shall remain in place subject to appropriate dilution.


 


(4)           In
lieu of the foregoing, the Company at its option, upon a Realization Event that
is not a sale for cash, notes and/or publicly-traded securities, may instead
liquidate the Appreciation Rights for cash (i) at the lower of Exit Value or
then Market Value (as measured by the Realization Event) as to rights held by
individuals who had previously terminated, and (ii) at the Market Value derived
by the Realization Event as if all Appreciation Rights were outstanding as to
individuals who had not previously terminated.


 


6.2           Payment
for Appreciation Rights.


 


(a)           Notwithstanding
the Company’s option described in Section 6.2(b) or a Participant’s option
described in Section 6.2(c), payment for the Participant’s vested Appreciation
Rights will be deferred until the occurrence of a Realization Event or the
Participant’s death, Disability or Retirement Date.  Upon such event, the Company will make payment to the Participant
(or the Participant’s Beneficiary if the Participant has died) in the amount of
the lower of (1) the Exit Value (as determined at the time of the Participant’s
termination) or (2) the Market Value derived by the Realization Event as if all
such Appreciation Rights were outstanding.


 


(b)           At
any time following a Participant’s termination of service, the Company shall
have the option to make payment on all vested Appreciation Rights exercisable,
based upon the Exit Value applicable to the particular Designated Units.


 


(c)           Except
as provided in Section 5.3, at any time following a Participant’s termination
of service but before the occurrence of a Realization Event or the
Participant’s death, Disability or Retirement Date, the Participant shall have
the option to receive payment from the Company on all vested Appreciation
Rights exercisable, based upon the Exit Value applicable to the particular
Designated Units.  Upon such request by
a Participant, payment shall be made by the Company within ninety (90) days of
such request, unless the amount to be paid exceeds $500,000 in which case
payment shall be made within one year of such request.


 


6.3           Realization
Event.  In connection with any
Realization Event, and as a condition to the receipt of any payment of
Appreciation Rights, each Participant shall take all necessary or desirable
actions requested by the Board in connection with such Realization Event,
including without limitation, execution of any and all agreements, documents
and instruments presented to such Board in the form presented to such
Participant.


 


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Article 7


 


Funding


 


7.1           Plan
Unfunded.  Nothing in this Plan
shall be interpreted or construed to require the Company in any manner to fund
any obligation to the Participants hereunder. 
Nothing contained in the Plan nor any action taken hereunder shall
create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and the Participants, Beneficiaries, or any
other persons.  Any funds which may be
accumulated in order to meet any obligation under this Plan shall for all
purposes continue to be a part of the general funds of the Company, as
applicable, and no person other than the Company, as applicable, shall by
virtue of the provisions of this Plan have any interest in such amounts.  To the extent that any person acquires a
right to receive payment from the Company, such rights shall be no greater than
the rights of any unsecured general creditor of the Company.


 


Article 8


 


Administration


 


8.1           Plan
Administrator.  The Committee shall
be the Plan Administrator.


 


8.2           Powers
and Duties of Committee.  The
Committee shall administer the Plan in accordance with its terms and shall have
all the powers necessary to carry out such terms.  The Committee shall act by a majority of its members at the time
in office, and such action may be taken by a vote at a meeting or in writing
without a meeting.  A member of the
Committee who is a Participant in the Plan shall not vote on any question
relating specifically to such Participant. 
Any such action shall be voted or decided by a majority of the remaining
members of the Committee.  The Committee
may appoint from its members such subcommittees with such powers as the
Committee shall determine.  Either the
Chairman, or a member of the Committee designated by the Chairman, shall
execute any certificate, instrument or other written direction on behalf of the
Committee.  All interpretations of the
Plan, and questions concerning its administration and application, shall be
determined by the Committee, and such determination shall be binding on all
persons except as otherwise expressly provided herein.


 


The Committee may appoint such accountants, counsel,
specialists, and other persons as it deems necessary or desirable in connection
with the administration of the Plan. 
Such accountants and counsel may, but need not, be accountants and
counsel for the Company.


 


The Committee may, pursuant to a written designation,
delegate to any person or entity any of its responsibilities under the Plan.


 


8.3           Determination
of Eligibility of Participants.  The
Committee shall determine the eligibility of Participants in accordance with
the provisions of the Plan.


 


8.4           Records
and Reports.  The Committee and
others to whom the Committee has delegated fiduciary duties shall keep a record
of all their proceedings and actions and shall maintain all such books of
account, records and other data as shall be necessary for the proper
administration of the Plan and to meet the reporting and disclosure
requirements of ERISA 


 


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which are applicable to this Plan. 
The Committee shall maintain records which shall contain all relevant
data pertaining to individual Participants and their rights under the
Plan.  The Committee shall have the duty
to carry into effect all rights or benefits provided hereunder to the extent
Company assets, as applicable are properly available therefor.


 


8.5           Payments
of Expenses.  The Company shall pay
all expenses of administering the Plan. 
Such expenses shall include any expenses incident to the functioning of
those to whom the Committee has delegated fiduciary duties, and those
professionals and other persons appointed by the Committee including, but not
limited to, the payment of professional fees of consultants, and the costs of
administering the Plan.


 


The members of the Committee shall serve without
compensation for their services, but all their expenses shall be paid by the
Company.


 


8.6           Indemnification
for Liability.  The Company shall
indemnify the members of the Committee and other individuals providing services
to the Company to whom the Committee has delegated fiduciary duties against any
ad all claims, losses, damages, expenses and liabilities arising from their
responsibilities in connection with the Plan, unless the same is determined to
be due to gross negligence or willful misconduct.


 


8.7           Agent
for Service of Legal Process.  The
name and address of the person designated for the service of legal process with
respect to the Plan are as follows:


 


	
  Name:

  	
  Robert A. Peterson

  
	
  Address:

  	
  2211 York Road, Suite
  215 

  Oak Brook, IL 60523

  



 


8.8           Claims
Procedure.  Claims for benefits
under the Plan shall be filed with the Committee, on the Appropriate Form
supplied by the Committee.  Written
notice of the disposition of a claim shall be furnished the claimant within
ninety (90) days after the application therefor is filed.  In the event the claim is denied, the
specific reasons for such denial shall be set forth, pertinent provisions of
the Plan shall be cited and, where appropriate, an explanation as to how the
claimant can perfect the claim or submit such claim for review will be
provided.


 


8.9           Claim
Review Procedure.  Any Participant,
former Participant, or Beneficiary of either, who has been denied a benefit
claim, shall be entitled, upon written require to the Committee, to receive a
written notice of such action, together with a full and clear statement of the
reasons for such action.  If the
claimant wishes further consideration of his position, the claimant may obtain
the Appropriate Form from the Committee on which to request a review of his
denied claim.  Such Form, together with
a written statement of the claimant’s position, shall be filed with the
Committee no later than sixty (60) days after receipt of the written
notification provided for above or in Section 8.8.  The Committee shall make its decision within sixty (60) days
after receipt of the claimant’s request for review.


 


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Article 9


 


Amendment and Termination


 


9.1           Amendment
and Termination.  The Board shall
have the right, at any time by an affirmative vote of a majority thereof, to amend
or terminate, in whole or in part, the Plan, provided that such amendment or
termination shall not adversely affect the vested interest of any Participant
under the Plan prior to such amendment or termination.


 


Article 10


 


Miscellaneous Provision


 


10.1         Rights
of Company to Discharge Persons. 
The adoption and maintenance of this Plan shall not be deemed to
constitute a contract between the Company and any person, or to be a
consideration for, or an inducement or condition of, the employment or engagement
of any person.  Nothing herein
contained, nor any action taken hereunder, shall be deemed to give any person
the right to be retained by the Company or to interfere with the right of the
Company to discharge any person at any time, nor shall it be deemed to give the
Company the right to require a person to remain in its service, nor shall it
interfere with person’s right to terminate his employment or service
relationship, respectively, at any time.


 


10.2         Alienation
or Assignment of Benefits.  A
Participant’s rights and interest under the Plan shall not be assigned or
transferred except by will or by the laws of descent and distribution.


 


10.3         Right
to Withhold.  The Company shall have
the right to deduct from all benefit payments hereunder any taxes required by
law to be withheld with respect to such payments.


 


10.4         Gender
and Number.  In interpreting the
Plan, the masculine gender may include the feminine, the neuter gender may
include the masculine or feminine, and the singular may include the plural unless
the context clearly indicates otherwise.


 


10.5         Construction.  All legal questions pertaining to the Plan
shall be determined in accordance with the laws of Illinois except as otherwise
preempted by the law of the United States of America.


 


10.6         Headings.  The headings are for reference only.  In the event of a conflict between a heading
and the context of an Article or Section, the context of the Article or Section
shall control.


 


*    *   
*     *


 


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IN WITNESS WHEREOF, NSP
Holdings L.L.C. has caused this instrument to be duly executed by its proper
officers thereunto duly authorized, under seal, as of this 17 day of
 February, 2000.


 


	
  ATTEST:

  	
   

  	
   

  
	
  /s/ DAVID F. MYERS, JR.

  	
   

  	
  /s/ ROBERT A. PETERSON

  
	
  Secretary

  	
  President